Characterization of property as separate or community in a Washington divorce case is determined at the date the property was acquired. An increase in separate property’s value is presumed to also be separate property. Separate property remains separate unless there is clear and convincing evidence showing it was converted to community property. Generally, a written acknowledgement is required to rebut the separate property presumption for real property. In a recent unpublished case, a Washington appeals court considered whether a trial court erred in characterizing equity in separate real property as community property.
A month before the marriage, the wife purchased a home for $207,000 with a $40,000 down payment. The parties got married in September 2016 and their son was born the same day. The wife generally stayed home caring for the child.
The husband petitioned for divorce in June 2022. The parties separated at the end of June. They agreed the marital home, which was the one purchased by the wife before the marriage, was worth $402,000. They also agreed it was the wife’s separate property, but the husband claimed he had an “equitable interest” in the property and asked the equity, less the wife’s down payment, be divided equally.
The husband testified he had been very involved in the home’s purchase but was not on the title or mortgage because of his bad credit. He said the wife promised to quitclaim the property to the community, but subsequently refused to do so.
The wife, however, testified the husband had not been very involved in the purchase and she had looked for homes without him. She denied promising to quitclaim the property. She also testified the husband had obtained a credit card during the marriage and $3,000 of its balance was for his attorney’s fees.
The court determined that the down payment was the wife’s separate property, but the rest of the equity was community property. The court awarded the husband half of the equity. The court found the home was purchased in the wife’s name because of her good credit. The court also found the husband paid for everything while the wife stayed home to care for the child. The court further found that it would be unfair and inequitable to deny equity to the husband. The court also concluded the entire $15,222 balance on the husband’s credit card was a community debt and awarded it to the husband.
The wife appealed, arguing the property award was not just and equitable. She argued the award put her in a worse position than she was in when she entered the marriage, while leaving the husband in a better position.
She argued the court erred by mischaracterizing most of the equity and the husband’s attorney’s fees as belonging to the community.
The wife purchased the home before the parties married. The appeals court noted the separate property presumption was not rebutted even if the property was in the wife’s name because of her better credit and even if the payments were made from the husband’s community wages. The trial court did not find the wife promised to quitclaim the property.
The husband acknowledged the home was the wife’s separate property, but argued that he had an equitable interest. The appeals court noted the community is entitled to reimbursement through an equitable lien when it has paid expenses for separate property. If the other spouse received a reciprocal benefit from using the property, however, there may not be a right to reimbursement. The appeals court noted the trial court should have offset the benefit the husband received from living in the property.
Neither party presented evidence regarding the benefit the husband received from living in the home. The appeals court reversed the division of the home’s equity and remanded to the trial court.
The appeals court agreed with the wife that the trial court erred in categorizing the portion of the husband’s credit card debt related to his attorney’s fees as community property. The appeals court also agreed with the husband, however, that the error was harmless because the court assigned the entire credit card debt to the husband and the amount was relatively small.
The appeals court reversed the property award and remanded for correction of the characterization of the home and the attorney’s fee portion of the credit card debt and to make a fair and equitable division of the property.
In this case, the wife purchased the home just a month before the marriage and the husband made mortgage and other payments during the marriage, but the appeals court concluded there was not sufficient evidence to show the property had been converted to community property. If you are considering ending your marriage and you or your spouse entered the marriage with significant assets, a knowledgeable Washington divorce attorney can advise you regarding separate property help you fight to protect your assets. Call Blair & Kim, PLLC, at (206) 622-6562 for a consultation.